State audit of UC calls for more financial transparency

A report issued by the California state auditor on Thursday suggested that the University of California should be more willing to make more of its financial information open to the public, though the report did not find cases of wasteful spending, as had been previously suggested by a state lawmaker.

The audit began last year following a request from state Sen. Leland Yee, D-San Francisco, who had alleged that the university was plagued with “waste, fraud and abuse.”

“The UC administration expects taxpayers and students to foot the bill without asking any questions,” Yee said in a statement when the audit was approved in February 2010. “It is long overdue for the UC administration to start acting like a public institution and not a private country club.”

Though the audit did not find excessive spending on the part of the university, it did find a “lack of specificity” in the university’s expense records as well as a discrepancy in the distribution of funds to each campus.

The report states that through reviewing the university’s accounting records, the state auditor found that the UC Office of the President uses a single accounting code — “miscellaneous services” — to account for more than $6 billion, or about 25 percent, of the university’s annual public noncompensation expenses for the five years that the audit reviewed.

“This lack of specificity prohibits meaningful analysis of a significant portion of the university’s expenses at a systemwide level and limits the ability of stakeholders to understand how the university uses these funds,” the report states.

Additionally, the report found that there is a significant difference in the amount of funds distributed to each campus.

For the fiscal year 2009-10, for example, UC Santa Barbara received $12,309 per student while UC Berkeley received $17,010 per student and UC San Francisco received $55,186 per student.

“Although we understand that differences in funding among the campuses can exist because the (UC Office of the President) does not distribute all funding to campuses on a per-student basis … we would expect that the university would be able to identify the reasons for any differences and be able to quantify them,” the report states.

However, UC President Mark Yudof said in a letter to State Auditor Elaine Howle that the findings had no basis.

“The University adamantly disagrees with the (Bureau of State Audits’) analysis and comments inferring an inequitable distribution of funding across campuses,” Yudof said in the letter. “There is absolutely no basis — statistically, historically, or ethically — for drawing such a connection. Furthermore, the BSA makes no investigation into or observation of disproportionate or inequitable treatment or outcomes for students at different campuses.”

According to the report, UCOP provided four examples of factors that contributed to the differences: specific research and public service programs that are budgeted separately from instruction, the size of a campus’s health sciences program, historical variations in the amount of support provided for graduate students and historical variations in the level of state support.

“Although the Office of the President has taken steps to make its budget more transparent in recent years, it could do more to improve the transparency of the processes it uses to determine annual budget amounts for the campuses,” the report states.

Though the auditor’s office found no evidence that the university considered the racial or ethnic makeup of the student populations at different campuses as part of its budget process, it did find that the four campuses with an above average percentage of students from “underrepresented” groups — UC Merced, UC Riverside, UC Santa Barbara and UC Santa Cruz — received less funding than they would have if each campus received the same amount per student.

According to the report, because the per-student amounts vary so much between campuses and have not been quantitatively explained, UCOP runs the risk that stakeholders may view the amounts as unfair.

According to a UCOP statement, the university has been developing a more transparent funding streams initiative prior to the audit that is now being implemented. The office also launched a systemwide task force to examine the relationships among “campus instruction, research and public service programs, student populations, campus costs and the distribution of funds to campuses,” the statement reads.

“We are proud of the fact that we have come through this review with validation of so many of our procedures and policies … But, at what cost?” Yudof said in the statement.

I read through the 27 comments. Somehow the point of the article is missed: h0w the money is spent is fairly reasonable. It’s the “transparency,” that is, the ability to quickly analyze costs, identify beneficiaries of spending, assessing what is being purchased, what kinds of funding sources pay for which expenses, etc. Some of these difficulties result directly from continually retrofitting older financial systems and ways of work — because it takes money to invest in new ways of working when you’re talking technology!

We at UC Berkeley have benefited for years from having a phenomenal, highly ethical controller, John Ellis (now stolen fair and square by UCSF), whose team issued annual summary reports that are helpful in big picture analysis. We also have both in-house and outside auditing resources. In addition, our research grant accounting files are also regularly audited. Our workforce as a whole truly believes in far higher ethical standards than is commonly found in the private sector (one big reason I returned to academia). So it does not surprise me that the State Auditor found spending was appropriate.

As for the difference of disbursing funding to each campus: to base this on a per-student basis is strange, for any heavy-research generating campus produces massive income in the form of overhead. While some of this income can be redirected elsewhere, the bulk of it goes to maintaining research facilities (read: buildings, physical plant, custodial service, utilities), the very expensive burden associated by meeting federally-contracted audit requirements (extensive contract reviewing/accounting/procurement/disbursements resources), and IT infrastructure.

Of course campuses like UCSF, UC Berkeley and UCLA will have larger components in return, just because of this income source. In addition, to subsidize a student’s education in an environment with more expensive, state-of-the-art facilities is going to cost more. Especially when you look at the cost of medical facilities and resources.

Last, perspective2’s attitude that public sector employees should, somehow, be paid 40-50% below market for their efforts is remarkably self-centered. And socially it’s corrosive. Why would one punish hard-working public sector staff? This in of itself will result in less income reaching communities (in the form of shopping, housing needs, services, etc., by creating a new low-income class who cannot afford anything but bare necessities). I can assure you that UC Berkeley has many highly educated people who would earn far more on the outside. So already they have chosen not a life focussed on materialism and money, but one that serves the public weal. And we are certainly sharing the pain; many of us have had no raises and de-facto pay cuts (furloughs and increased retirement contributions), plus extensive layoffs, over the past 5 years, preceding the current recession, because of California Legislative defunding of the higher education systems.

And, yes, it’s hurting California students. But that’s not just the California Legislative choice, this is also caused by defunding of federal student grants and loan programs as well. Really depressing to watch these legislative choices…

Anonymous

Like any addiction, admitting you have a problem is the first step toward correcting it. University of California Berkeley Chancellor Birgeneau
($500,000 salary) has forgotten he is a public servant, steward of the public money,
not overseer of his own fiefdom.

Recruits (using California tax $) out of state, foreign
$50,600 students who displace qualified sons, daughters of Californians from Cal.

Tuition fee increases exceed national average rate of increase

Spends
$7,000,000 + for consultants to do his & vice chancellors work
(Prominent East Coast University accomplishing same 0 cost).

University accrues $150 million of inefficiencies over his 8 year reign.

Pays: ex Michigan governor $300,000 for lectures.

In procuring $3,000,000 consultant failed to receive proposals from other firms.

Latino enrollment drops while out of state jumps 2010(M Krupnick Contra Costa Times)

These are not isolated examples: it’s all shameful. There is no justification for
such irregularities by a steward of the public trust. Absolutely none.

Birgeneau’s spend thrift practices will not change. University of California Board of Regents Chair Sherry Lansing must do a better job of vigorously enforcing financial oversight of Birgeneau who treat’s Cal. as his fiefdom. Only then will confidence of Alumni, donators begin to improve.

I
have 35 years’ consulting experience; have taught at UC Berkeley, where I
observed the culture & the way senior management works. My agenda is
transparency. No, I was not fired or downsized & have not solicited contracts
from UC/Cal.

There is no good reason to raise tuition, fees when
wage concessions are available. UC wages must reflect California’s
ability to pay, not what others are paid. If wages better elsewhere,
chancellors, vice chancellors, tenured, non tenured faculty, UCOP apply for the
positions. If wages determine commitment to UC Berkeley, leave for better paying
position. The sky above the 10 campuses will not fall.

Pitch in (with deeds not words) for all California
Democrats, Republicans UC!

It is especially galling to continue to generously
compensate chancellors, vice-chancellors, faculty while Californians are making
financial sacrifices and faculty, chancellor, vice-chancellor turnover is one
of the lowest of public universities.

The message that President Yudof, UC Board of Regent
Chair Lansing, UC Berkeley Birgeneau are sending is that they have more concern
for generously paid chancellors, faculty. The few at the top need to get a grip
on economic reality and fairness.

You clearly don’t understand how a university is run, and you apparently have no figures to demonstrate how your plan would work. The UC system is underfunded by a billion dollars. How much does your scheme raise?

Anonymous

“Stop the
spending of $ 3 million on Consultants for UCB Chancellor Birgeneau

These
days ever single dollar in higher education counts!

Why
does one of the top universities in the world have to spend $3 million of UC
money for consultants to do what should be done impartially and internally by
UCB Chancellor Birgeneau and his senior UCB management staff?

Who teaches auditors how to audit? Do the world-class UC
professors not have the knowledge to perform what they teach?

Having
first hand knowledge of consulting, I know one cardinal rule, “Don’t bite
the hand that pays you.”

In a
nutshell, we have a high-paid, skilled, professional UCB Chancellor who is
unable or unwilling to do the job he is paid to do. Why do we wonder that UC /UCB
and California are in a financial crisis!

I’m
sure taxpayers would not object to the $3 million payout if the money is
reimbursed by taking money from the UCB Chancellor Birgeneau’s salary over the
next 10 years.

Stop
the spending of $3,000,000 on consultants by UCB Chancellor and do the job
impartially and internally with the professional UCB faculty and staff. Direct
Chancellor Birgeneau and the UCB senior management to do their jobs or step
aside.

I was there I know what I’m talking about: and no I was not fired, downsized, retired

The facts will make the difference, calling a person names is denial!

Guest

First of all, note that I didn’t call you a name, though I said that your comments are idiotic. You say you know what you’re talking about, but I worked for the campus a lot longer than you did, and your facts are dead wrong. What business is this of yours? You seem to delight in stirring up trouble when the campus is in distress. The results of a State audit have just shown that the University’s finances are sensibly managed. Why don’t you go and pester Congress?

Sam

““Stop the spending what was $ 3 million and is now $ 7 million on OE Consultants to do the job of the UCB Chancellor Birgenea”

Okay, if we’d done that the University’s underfunding would reduce from a billion dollars to $993 million. And your solution for the rest?

UC wages must reflect California’s
ability to pay, not what others are paid. There is no good reason to
raise tuition, fees during the longest, deepest recession in California’s history when wage concessions
are available from Chancellors, Faculty. The sky will not fall on UC.

“UC wages must reflect California’s
ability to pay, not what others are paid.”
Explain this to my landlord.

Anonymous

University of California Berkeley Chancellor Birgeneau wasteful and not transparent. Cal Chancellor Birgeneau ($500,000 salary) has forgotten that he is a public servant, steward of the public money, not overseer of his own fiefdom.

These are not isolated examples: recruits (uses
California tax $) out of state $50,000 tuition students that displace qualified
Californians from public university education; spends $7,000,000 + for
consultants to do his & many vice chancellors jobs (prominent East Coast university accomplishing same 0 cost); pays
ex Michigan governor $300,000 for lectures; in procuring a $3,000,000 consulting firm he failed to receive
proposals from other firms; Latino enrollment drops while out of state
jumps 2010; tuition to Return on Investment drops below top 10; QS academic
ranking falls below top 10; only 50 attend Birgeneau all employees meeting;
visits down 20%; NCAA places basketball program on probation, absence
institutional control.

It’s all shameful.

Anonymous

There are fewer undocumented immigrants in California – and the Sacramento region – because many are now finding the American dream south of the border.

“It’s now easier to buy homes on credit, find a job and access higher education in Mexico,” Sacramento’s Mexican consul general, Carlos González Gutiérrez, said Wednesday. “We have become a middle-class country.”

Adios vatos!!

Guest

It may all be shameful, but little of it is Birgeneau’s fault. Out-of-state students, for instance, are not “displacing” California students. The Legislature refuses to pay its subsidy for California students, even though it encouraged UC campuses to overenroll. The problems you discuss are system-wide and began long before Birgeneau was hired.

Anonymous

Unfortunately FOREIGN $50,600 are displacing qualified for public university education californians: democtrats and republicans
All of these occured under UC berkeley Chancellor Birgeneau’s 8 year reign at Cal, They are NOT system wide systemic problems.

Spends $7,000,000 + for consultants to do his & vice chancellors work

(prominent East Coast University accomplishing same 0 cost).

University accrues $150 million of inefficiencies over his 8 year reign.

Pays ex Michigan governor $300,000 for lectures.

In procuring $3,000,000 consultants failed to receive proposals from other firms.

Latino enrollment drops while out of state jumps 2010.(M Krupnick Contra Costa Times)

Recruits (using California tax $) out of state, foreign $50,000 tuition students who displace qualified sons,
daughters of Californians from public university education.

Honorably fire Cal Chancellor Birgeneau for his 6 years of spend thrift policies

Guest

“FOREIGN $50,600 are displacing qualified for public university education californians:”
Not really. UC has admitted all the Californians that the Legislature was willing to pay for, and there’s some overenrollment of California students who aren’t funded but can stay until they graduate.
Because our funded enrollments used to be higher, we have classrooms and faculty to educate more students, so non-Californians have been recruited to fill the vacant capacity and provide income to offset the State’s budget slashing.

Anonymous

Yes really Guest, University of California Berkeley Chancellor has displaced qualified for public university education californians at Cal with $50,600 Foreign and out of state students.
Share the sacrafice with Californians University of California Berkeley Chancellors Vice Chancellors, Faculty – Californians face mortgage defaults, 12%
unemployment, pay reductions, loss of unemployment benefits. No layoff of UC
Chancellors, Faculty during greatest recession of modern times.
UC and UCB wages must reflect California’s ability to
pay, not what others are paid

Chancellor Birgeneau and UC Board of Regents Chair Sherry Lansing can bridge the public
trust gap with reassurances that UCB salaries reflect depressed wages in California. The sky will
not fall on UC & UCB

Chancellor Birgeneau and UC Board of Regents Chair Sherry Lansing can bridge the public
trust gap with reassurances that UCB salaries reflect depressed wages in California.
The sky will
not fall on UC & UCB

Guest

I’m growing weary of correcting your errors. UC has not refused to admit California students; the Legislature has refused to pay for their instruction. The administration and faculty have both suffered layoffs; for faculty it’s called denial of tenure. UC wages are frozen, and everyone took a year of “furlough.” UC cannot breach employment contracts and reduce the wages of its workers. If you have no practical ideas to address UC’s problems, shut up.

Anonymous

Facts never fit spin doctor perspectives Guest. UC admits $50,600 Foreign and out of state students and displaces qualified for Cal university education Californians.
Chancellors, Vice Chancellors and faculty have not been laid off. UC always fired incompetent faculty: lay offs include tenured and non tenured faculty.
UC Berkeley is not vaccinated against imposed wage concessions if Chancellors, Vice Chancellors Faculty do not agree to sacrifice – wage concessions- for Californians. (Californians face mortgage defaults, 12%
unemployment, pay reductions, loss of unemployment benefits).
All above are practicle and can be implementd by UC.
Increasing Guest represents the arrogance of Cal: only tell me what I want to hear.
Facts trump “shut up”

Guest

All right. Continue to expose your ignorance and reluctance to recognize reality. But your ideas are mistaken and useless.

Anonymous

Facts are always friendly Guest.

UC
Berkeley–one of the top universities in the nation, home to some of the finest
professors, graduating some of the brightest students–can’t figure out how to
save money. No joke. UC Berkeley spent $3 million plus expenses to hire an
out-of-state auditing firm to help them find ways to reduce spending.

According
to the Contra Costa Times,
October 10, 2009, “When UC Berkeley Chancellor Robert Birgeneau ($500,000 salary) was
confronted with the $150 million challenge, he gave the matter deep thought,
turned his focus eastward to the Boston-based consulting firm Bain & Co.
and agreed to pay a $3 million budget (actual cost $7.2 million and growing) over
the next two years for someone else to solve the problem.

“We [the
Times] never attended business school, but we’re pretty sure that one of the
definitions of financial crisis is spending $3 million on consultants to tell
you how to get by with $150 million less than you thought you had.”

The
rationale for hiring the consulting firm given by Vice Chancellor Frank Yeary:
“I
understand at one level, … if you don’t have enough money, why are you spending
money on external consultants? Most people who are closer to it say it’s more
sophisticated than that.

“If we
spend $1.5 million this year and $1.5 million out of savings next year and
we’re successful in delivering tens of millions of dollars in savings every
year, I think that’s the goal against which we should be judged.”

Incredible!
Millions of dollars could have been saved just by using the expertise on UC
campuses. The system has, for example, multiple senior administrators with
Ph.D.s who are getting nice paychecks for their expertise, the Budget Office
staff gets paid to solve budget problems, and the renowned Haas School of
Business has a world class lineup of business experts and graduate programs in
financial engineering, global management, accounting, financing, and operations
management.

Moreover,
the funds used to pay the high cost of hiring outside consultants could have
been used to make up for state budget cuts, student fee increases, furloughs
and layoffs.

But,
according to Vice Chancellor Frank Yeary, “The reason for not relying on internal experts
is that self-diagnosis is not always impartial.”

If this is
the reasoning by UC Berkeley decision makers, it is no wonder they are in a
fiscal crisis. If the university system can’t trust its internal audits, maybe
it is time for outside auditors to make all the university’s financial
decisions. Those decisions might be based on more practical thinking than those
made by the current university leadership.

Guest

Repeating nonsense over and over doesn’t make it sensible. Your “facts” are just your biases.

Anonymous

your opinions are your biases: facts are always friendly

Anonymous

And of course your responses are not your biases. Come to think of it they are the biases of the incompetent senior management headed by Cal Chancellor Birgeneau.
Facts are always friendly.

Guest

Leland Yee owes President Yudof an apology.

Anonymous

UC Berkeley’s Financial Adversity
Spawns Positive Innovation, Financial Mistakes. (The author who has 35 years’
consulting experience, has taught at University
of California Berkeley,
where he was able to observe the culture & the way senior management work)

University of California Berkeley (Cal) Chancellor’s huge
mistakes: recruits (using California tax $) out of state $50,000 tuition
students that displace qualified Californians from public university; spends $7,000,000
+ for consultants to do his & many vice chancellors jobs (prominent East Coast university
accomplishing same at 0 cost); pays ex Michigan governor $300,000 for
lectures; Latino enrollment drops while out of state jumps 2010; tuition to
Return on Investment (ROI) drops below top 10; QS ranking below top ten: NCAA
places basketball program on probation: absence institutional control.

Chancellor Birgeneau’s
($500,000 salary) fiscal track record is dismal indeed. He would like to blame the politicians, since
they stopped giving him every dollar asked for, & the state legislators do
share some responsibility for the financial crisis. But not in the sense he means.

A competent
chancellor would have been on top of identifying inefficiencies & then
crafting a plan to fix them. Able oversight by the UC Board of Regents &
the legislature would have required him to provide data on inefficiencies &
on what steps he was taking to solve them during his 8 year reign. Instead, every year Birgeneau would request a
budget increase, the timid president, regents would agree to it, and the
legislature would provide. The hard
questions were avoided by all concerned, & the problems just piled up to
$150 million of inefficiencies….until there was no money left.

It’s not
that Birgeneau was unaware that there were, in fact, waste & inefficiencies
during his 8 year reign. Faculty & staff raised issues with Birgeneau &
Provost Breslauer ($400,000 salary), but when they failed to see relevant
action taken, they stopped. Finally,
Birgeneau engaged expensive ($7,000,000 +) consultants to tell him & the
Provost what they should have known as leaders or been able to find out from
the bright, engaged people. (Prominent east-coast University accomplishing same
at 0 costs)

We are sympathetic
to the frustration of UC Chancellors running their campuses with declining
support from the state. Cal.
has been badly damaged by Birgeneau. Good people are loosing their jobs. Cal’s leadership is
either incompetent or culpable. Merely cutting out inefficiencies does not have
the effect desired.

But you
never want a crisis to go to waste. Increasing Cal’s budget is not enough; Birgeneau’s will
continue huge mistakes; we believe the best course is to honorably replace Cal.
Chancellor Birgeneau

There is absolutely no reason that each campus should receive the same amount of funding per student. UCSF has no undergraduates and teaches technology-intensive graduate programs in the health sciences. UCSB has no such programs and makes no attempt to function at that level.

Guest 2

No one told Yee that UCSF is strictly a graduate-level school! He just likes to throw out numbers and jump to conclusions. Funny since he is running for mayor of San Fran.

Guest

I’ll bet the Police Chief is looking forward to that. Wikipedia has this little nugget: “Yee has also been pulled over by SFPD twice, under the suspicion that he
was cruising for prostitutes in the Mission District of San Francisco
on South Van Ness Avenue. In each case, he was questioned by police and
let go with no charges filed.”

Jwalkerafficianado

UC as as “private country club” hahaha .. Leland Yee is an utter moron and I don’t even know which is worse, Yudof or Yee